| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

----

| Pennsylvania                    |   | 23-2249083          |
|---------------------------------|--------|---------------------|
| (State or other jurisdiction of |   | (I.R.S. Employer    |
| incorporation or organization)  |   | identification No.) |

| 111 West Front Street, Berwick, PA       |   | 18603      |
|------------------------------------------|--------|------------|
| (Address of principal executive offices) |   | (Zip Code) |

| Large accelerated filer |  ̈ | Accelerated filer | x | Non-accelerated filer |  ̈ | Smaller reporting company |  ̈ |
|-------------------------|--------|-------------------|---|-----------------------|--------|---------------------------|--------|

----

| (Amounts in thousands)                                      |   | March       |    |   | December |   |
|-------------------------------------------------------------|--------|-------------|---------|--------|----------|--------|
|                                                        |   | 2011        |    |   | 2010     |   |
|                                                        |   | (Unaudited) |    |   |     |   |
| ASSETS                                                      |   |        |    |   |     |   |
| Cash and due from banks                                     |   | $           | 8,072   |   |     | $      | 4,346 |   |
| Interest-bearing deposits in other banks                    |   |        | 22,340  |   |     |   | 4,559 |   |
| Federal funds sold                                          |   |        | 0       |   |     |   | 3,000 |   |
| Total cash and cash equivalents                             |   | $           | 30,412  |   |     | $      | 11,905 |   |
| Investment securities available-for-sale                    |   |        | 296,963 |   |     |   | 303,902 |   |
| Investment securities held-to-maturity estimated fair value |   |        |    |   |     |   |   |   |
| of $6,199 in 2011 and $6,191 in 2010                        |   |        | 6,257   |   |     |   | 6,266 |   |
| Restricted securities at cost - available-for-sale          |   |        | 6,046   |   |     |   | 6,363 |   |
| Loans, net of unearned income                               |   |        | 409,997 |   |     |   | 409,651 |   |
| Allowance for loan losses                                   |   |        | (5,861  | )      |     |   | (5,701 | ) |
| Net loans                                                   |   | $           | 404,136 |   |     | $      | 403,950 |   |
| Premises and equipment, net                                 |   |        | 12,011  |   |     |   | 11,842 |   |
| Accrued interest receivable                                 |   |        | 4,278   |   |     |   | 4,589 |   |
| Cash surrender value of bank owned life insurance           |   |        | 18,578  |   |     |   | 18,388 |   |
| Investment in limited partnerships                          |   |        | 1,571   |   |     |   | 1,600 |   |
| Goodwill                                                    |   |        | 19,133  |   |     |   | 19,133 |   |
| Core deposit intangible                                     |   |        | 1,168   |   |     |   | 1,240 |   |
| Prepaid FDIC insurance                                      |   |        | 1,799   |   |     |   | 2,005 |   |
| Foreclosed assets held for resale                           |   |        | 1,472   |   |     |   | 1,149 |   |
| Deferred income taxes                                       |   |        | 3,241   |   |     |   | 2,742 |   |
| Other assets                                                |   |        | 2,218   |   |     |   | 1,527 |   |
| TOTAL ASSETS                                                |   | $           | 809,283 |   |     | $      | 796,601 |   |
|                                                        |   |        |    |   |     |   |   |   |
| LIABILITIES                                                 |   |        |    |   |     |   |   |   |
| Deposits:                                                   |   |        |    |   |     |   |   |   |
| Non-interest bearing                                        |   | $           | 77,147  |   |     | $      | 69,080 |   |
| Interest bearing                                            |   |        | 549,202 |   |     |   | 557,815 |   |
| TOTAL DEPOSITS                                              |   |        | 626,349 |   |     |   | 626,895 |   |
| Short-term borrowings                                       |   |        | 24,734  |   |     |   | 20,977 |   |
| Long-term borrowings                                        |   |        | 71,385  |   |     |   | 66,400 |   |
| Accrued interest and other expenses                         |   |        | 3,258   |   |     |   | 2,976 |   |
| Other liabilities                                           |   |        | 4,362   |   |     |   | 293 |   |
| TOTAL LIABILITIES                                           |   | $           | 730,088 |   |     | $      | 717,541 |   |
|                                                        |   |        |    |   |     |   |   |   |
| STOCKHOLDERS' EQUITY                                        |   |        |    |   |     |   |   |   |
| Common stock, par value $2.00 per share                     |   |        | 11,375  |   |     |   | 11,375 |   |
| Surplus                                                     |   |        | 30,173  |   |     |   | 30,175 |   |
| Retained earnings                                           |   |        | 46,435  |   |     |   | 45,246 |   |
| Accumulated other comprehensive (loss)                      |   |        | (2,687  | )      |     |   | (1,633 | ) |
| Less treasury stock, at cost, 243,475 shares in 2011 and    |   |        |    |   |     |   |   |   |
| 243,540 shares in 2010                                      |   |        | (6,101  | )      |     |   | (6,103 | ) |
|                                                        |   |        |    |   |     |   |   |   |
| TOTAL STOCKHOLDERS' EQUITY                                  |   | $           | 79,195  |   |     | $      | 79,060 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  |   | $           | 809,283 |   |     | $      | 796,601 |   |

----

|                                                |   | 2011   |   |   | 2010   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|
| INTEREST INCOME                                     |   |   |   |   |   |   |
| Interest and fees on loans                          |   | $      | 5,845  |   |   | $      | 5,999 |   |
| Interest and dividend income on securities          |   |   | 3,500  |   |   |   | 3,431 |   |
| Deposits in banks                                   |   |   | 2      |   |   |   | 3 |   |
| Total interest income                               |   | $      | 9,347  |   |   | $      | 9,433 |   |
|                                                |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE                                    |   |   |   |   |   |   |   |   |
| Deposits                                            |   | $      | 1,839  |   |   | $      | 2,464 |   |
| Short-term borrowings                               |   |   | 50     |   |   |   | 51 |   |
| Long-term borrowings                                |   |   | 627    |   |   |   | 954 |   |
| Total interest expense                              |   | $      | 2,516  |   |   | $      | 3,469 |   |
|                                                |   |   |   |   |   |   |   |   |
| Net interest income                                 |   | $      | 6,831  |   |   | $      | 5,964 |   |
| Provision for loan losses                           |   |   | 300    |   |   |   | 200 |   |
| Net interest income after provision for loan losses |   | $      | 6,531  |   |   | $      | 5,764 |   |
|                                                |   |   |   |   |   |   |   |   |
| NON-INTEREST INCOME                                 |   |   |   |   |   |   |   |   |
| Trust department                                    |   | $      | 140    |   |   | $      | 172 |   |
| Service charges and fees                            |   |   | 316    |   |   |   | 367 |   |
| Bank owned life insurance income                    |   |   | 190    |   |   |   | 188 |   |
| ATM fees and debit card income                      |   |   | 210    |   |   |   | 185 |   |
| Gain on sale of mortgage loans                      |   |   | 40     |   |   |   | 99 |   |
| Investment securities losses - net                  |   |   | (75    | )      |   |   | (36 | ) |
| Other                                               |   |   | 142    |   |   |   | 121 |   |
| Total non-interest income                           |   | $      | 963    |   |   | $      | 1,096 |   |
|                                                |   |   |   |   |   |   |   |   |
| NON-INTEREST EXPENSE                                |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                      |   | $      | 2,283  |   |   | $      | 2,210 |   |
| Occupancy, net                                      |   |   | 354    |   |   |   | 342 |   |
| Furniture and equipment                             |   |   | 100    |   |   |   | 104 |   |
| Computer expenses                                   |   |   | 234    |   |   |   | 225 |   |
| Professional services                               |   |   | 153    |   |   |   | 184 |   |
| State shares tax                                    |   |   | 183    |   |   |   | 177 |   |
| FDIC insurance                                      |   |   | 245    |   |   |   | 202 |   |
| Other                                               |   |   | 752    |   |   |   | 677 |   |
| Total non-interest expenses                         |   | $      | 4,304  |   |   | $      | 4,121 |   |
|                                                |   |   |   |   |   |   |   |   |
| Income before income taxes                          |   | $      | 3,190  |   |   | $      | 2,739 |   |
| Income tax expense                                  |   |   | 694    |   |   |   | 552 |   |
| Net Income                                          |   | $      | 2,496  |   |   | $      | 2,187 |   |
|                                                |   |   |   |   |   |   |   |   |
| PER SHARE DATA                                      |   |   |   |   |   |   |   |   |
| Net Income Per Share:                               |   |   |   |   |   |   |   |   |
| Basic                                               |   | $      | .46    |   |   | $      | .40 |   |
| Diluted                                             |   |   | .46    |   |   |   | .40 |   |
| Cash dividends per share                            |   |   | .24    |   |   |   | .23 |   |

----

|                       |   |   |   |   |    |   |   |          |   |   |     |   |   | Accumulated   |   |   |     |   |   |   |   |
|---------------------------------|--------|--------|--------|--------|---------|--------|--------|---------------|--------|--------|----------|--------|--------|---------------|--------|--------|----------|--------|--------|--------|--------|
|                            |   |   |   |   |    |   |   |          |   |   |     |   |   | Other         |   |   |     |   |   |   |   |
|                            |   | Common |   |   |    |   |   | Comprehensive |   |   | Retained |   |   | Comprehensive |   |   | Treasury |   |   |   |   |
|                            |   | Stock  |   |   | Surplus |   |   | Income        |   |   | Earnings |   |   | (Loss)        |   |   | Stock    |   |   | Total  |   |
| Balance at December 31, 2009    |   | $      | 11,375 |   |    | $      | 30,269 |          |   |   |     |   | $      | 41,346        |   |   | $        | (2,583 | )      |   | $      | (6,240 | ) |   | $ | 74,167 |   |
| Comprehensive Income:           |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |
| Net Income                      |   |   |   |   |    |   |   |          |   | $      | 2,187    |   |   |          | 2,187  |   |     |   |   |   |   |   |   |   |   |   | 2,187 |   |
| Change in net unrealized        |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| gain (loss) on investment       |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| securities available-for-       |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| sale, net of reclassification   |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| adjustment and tax effects      |   |   |   |   |    |   |   |          |   |   | 1,670    |   |   |          |   |   |     |   | 1,670  |   |   |   |   |   |   |   | 1,670 |   |
| Total comprehensive income      |   |   |   |   |    |   |   |          |   | $      | 3,857    |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of 4,101 shares of     |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| treasury stock upon exercise    |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| of employee stock options       |   |   |   |   |    |   | (11    | )             |   |   |     |   |   |          |   |   |     |   |   |   |   |   | 16 |   |   |   | 5 |   |
| Cash dividends - $.23 per share |   |   |   |   |    |   |   |          |   |   |     |   |   |          | (1,251 | )      |     |   |   |   |   |   |   |   |   |   | (1,251 | ) |
|                            |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2010       |   | $      | 11,375 |   |    | $      | 30,258 |          |   |   |     |   |   | $             | 42,282 |   |     | $      | (913   | )      |   | $ | (6,224 | ) |   | $ | 76,778 |   |
|                            |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010    |   | $      | 11,375 |   |    | $      | 30,175 |          |   |   |     |   |   | $             | 45,246 |   |     | $      | (1,633 | )      |   | $ | (6,103 | ) |   | $ | 79,060 |   |
| Comprehensive Income:           |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                      |   |   |   |   |    |   |   |          |   | $      | 2,496    |   |   |          | 2,496  |   |     |   |   |   |   |   |   |   |   |   | 2,496 |   |
| Change in unrealized            |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| gain (loss) on investment       |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| securities available-           |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| sale, net of reclassification   |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| adjustment and tax effects      |   |   |   |   |    |   |   |          |   |   | (1,054   | )      |   |          |   |   |     |   | (1,054 | )      |   |   |   |   |   |   | (1,054 | ) |
| Total Comprehensive income      |   |   |   |   |    |   |   |          |   | $      | 1,442    |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of 65 of treasury      |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| stock upon exercise of          |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| employee stock options          |   |   |   |   |    |   | (2     | )             |   |   |     |   |   |          |   |   |     |   |   |   |   |   | 2 |   |   |   |   |   |
| Cash dividends - $.24 per share |   |   |   |   |    |   |   |          |   |   |     |   |   |          | (1,307 | )      |     |   |   |   |   |   |   |   |   |   | (1,307 | ) |
|                            |   |   |   |   |    |   |   |          |   |   |     |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2011       |   | $      | 11,375 |   |    | $      | 30,173 |          |   |   |     |   |   | $             | 46,435 |   |     | $      | (2,687 | )      |   | $ | (6,101 | ) |   | $ | (79,195 | ) |

----

| (Amounts in thousands)                                                                       |   | 2011   |    |   | 2010   |   |
|----------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| OPERATING ACTIVITIES                                                                         |   |   |    |   |   |   |
| Net income                                                                                   |   | $      | 2,496   |   |   | $      | 2,187 |   |
| Adjustments to reconcile net income to net cash provided by  operating activities: |   |   |    |   |   |   |   |   |
| Provision for loan losses                                                                    |   |   | 300     |   |   |   | 200 |   |
| Provision for depreciation and amortization                                                  |   |   | 228     |   |   |   | 240 |   |
| Core deposit amortization                                                                    |   |   | 72      |   |   |   | 69 |   |
| Premium amortization on investment securities                                                |   |   | 278     |   |   |   | 146 |   |
| Discount accretion on investment securities                                                  |   |   | (294    | )      |   |   | (334 | ) |
| Gain on sale of mortgage loans                                                               |   |   | (40     | )      |   |   | (99 | ) |
| Proceeds from sale of mortgage loans                                                         |   |   | 4,697   |   |   |   | 3,529 |   |
| Originations of mortgage loans for resale                                                    |   |   | (4,252  | )      |   |   | (1,824 | ) |
| Loss on sales of investment securities                                                       |   |   | 75      |   |   |   | 36 |   |
| Deferred income tax provision                                                                |   |   | 40      |   |   |   | 34 |   |
| Increase in interest receivable and other assets                                             |   |   | (380    | )      |   |   | (505 | ) |
| Decrease in prepaid FDIC insurance                                                           |   |   | 206     |   |   |   | 186 |   |
| Increase in cash surrender bank owned life insurance                                         |   |   | (190    | )      |   |   | (188 | ) |
| Increase (decrease) in interest payable, accrued expenses and other liabilities              |   |   | 181     |   |   |   | (26 | ) |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                                    |   | $      | 2,417   |   |   | $      | 3,651 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                         |   |   |    |   |   |   |   |   |
| Purchases of investment securities held-to-maturity                                          |   |   | 0       |   |   |   | (1,028 | ) |
| Purchases of investment securities available-for-sale                                        |   |   | (42,169 | )      |   |   | (18,637 | ) |
| Proceeds from sales of investment securities available-for-sale                              |   |   | 44,129  |   |   |   | 4,966 |   |
| Proceeds from the redemption of restricted securities                                        |   |   | 317     |   |   |   | 0 |   |
| Proceeds from maturities and redemptions                                                     |   |   |    |   |   |   |   |   |
| of investment securities available for sale                                                  |   |   | 7,467   |   |   |   | 6,485 |   |
| Proceeds from maturities and redemption of                                                   |   |   |    |   |   |   |   |   |
| investment securities held-to-maturity                                                       |   |   | 39      |   |   |   | 724 |   |
| Net increase (decrease) in loans                                                             |   |   | (1,193  | )      |   |   | 48 |   |
| Purchase of premises and equipment                                                           |   |   | (389    | )      |   |   | (610 | ) |
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                          |   | $      | 8,201   |   |   | $      | (8,052 | ) |
|                                                                                         |   |   |    |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                         |   |   |    |   |   |   |   |   |
| Net increase (decrease) in deposits                                                          |   | $      | (546    | )      |   | $      | 24,161 |   |
| Net increase (decrease) in short-term borrowings                                             |   |   | 3,757   |   |   |   | (2,558 | ) |
| Proceeds from long-term borrowings                                                           |   |   | 5,000   |   |   |   | 7,000 |   |
| Repayment of long-term borrowings                                                            |   |   | (15     | )      |   |   | (14 | ) |
| Proceeds from the exercise of stock options                                                  |   |   | 0       |   |   |   | 5 |   |
| Cash dividends                                                                               |   |   | (1,307  | )      |   |   | (1,251 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                                    |   | $      | 6,889   |   |   | $      | 27,343 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| INCREASE IN CASH AND CASH EQUIVALENTS                                                        |   |   | 18,507  |   |   | $      | 22,942 |   |
| CASH AND CASH EQUIVALENTS, BEGINNING                                                         |   |   | 11,905  |   |   |   | 11,426 |   |
| CASH AND CASH EQUIVALENTS, ENDING                                                            |   | $      | 30,412  |   |   | $      | 34,368 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                             |   |   |    |   |   |   |   |   |
| Cash paid during period for interest                                                         |   | $      | 2,614   |   |   | $      | 3,572 |   |
| Loans transferred to foreclosed assets held for resale                                       |   |   | 323     |   |   |   | 0 |   |
| Investment securities purchased - $4,170 less settlement obligation $4,170 in 2011           |   |   | 0       |   |   |   | 0 |   |

----

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|                                                      |   | Available-for-Sale Securities |    |
|-----------------------------------------------------------|--------|-------------------------------|---------|
| (Amounts in thousands)                                    |   |                          |    |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                                      |   | Amortized                     |    |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| March 31, 2011:                                           |   | Cost                          |    |   | Gains |   |   | Losses |   |   | Value |   |
| Obligations of U.S. Government Corporations and Agencies: |   |                          |    |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                                           |   | $                             | 66,349  |   |   | $ | 1,201 |   |   | $ | (148 | ) |   | $ | 67,402 |   |
| Other                                                     |   |                          | 8,118   |   |   |   | 36 |   |   |   | (30 | ) |   |   | 8,124 |   |
| Obligations of state and political subdivisions           |   |                          | 175,057 |   |   |   | 1,672 |   |   |   | (7,784 | ) |   |   | 168,945 |   |
| Corporate securities                                      |   |                          | 49,772  |   |   |   | 1,000 |   |   |   | (143 | ) |   |   | 50,629 |   |
| Marketable equity securities                              |   |                          | 1,725   |   |   |   | 271 |   |   |   | (133 | ) |   |   | 1,863 |   |
| Restricted equity securities                              |   |                          | 6,046   |   |   |   | — |   |   |   | — |   |   |   | 6,046 |   |
| Total                                                     |   | $                             | 307,067 |   |   | $ | 4,180 |   |   | $ | (8,238 | ) |   | $ | 303,009 |   |

|                                                      |   | Held-to-Maturity Securities |   |
|-----------------------------------------------------------|--------|-----------------------------|--------|
| (Amounts in thousands)                                    |   |                        |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                                      |   | Amortized                   |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| March 31, 2011:                                           |   | Cost                        |   |   | Gains |   |   | Losses |   |   | Value |   |
| Obligations of U.S. Government Corporations and Agencies: |   |                        |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                                           |   | $                           | 137    |   |   | $ | 3 |   |   | $ | — |   |   | $ | 140 |   |
| Other                                                     |   |                        | 5,023  |   |   |   | 19 |   |   |   | (67 | ) |   |   | 4,975 |   |
| Obligations of state and political subdivisions           |   |                        | 1,097  |   |   |   | — |   |   |   | (13 | ) |   |   | 1,084 |   |
| Total                                                     |   | $                           | 6,257  |   |   | $ | 22 |   |   | $ | (80 | ) |   | $ | 6,199 |   |

----

|                                                      |   | Available-for-Sale Securities |    |
|-----------------------------------------------------------|--------|-------------------------------|---------|
| (Amounts in thousands)                                    |   |                          |    |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                                      |   | Amortized                     |    |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| December 31, 2010:                                        |   | Cost                          |    |   | Gains |   |   | Losses |   |   | Value |   |
| Obligations of U.S. Government Corporations and Agencies: |   |                          |    |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                                           |   | $                             | 43,673  |   |   | $ | 1,250 |   |   | $ | (146 | ) |   | $ | 44,777 |   |
| Other                                                     |   |                          | 7,079   |   |   |   | 47 |   |   |   | (30 | ) |   |   | 7,096 |   |
| Obligations of state and political subdivisions           |   |                          | 182,181 |   |   |   | 2,617 |   |   |   | (7,546 | ) |   |   | 177,252 |   |
| Corporate securities                                      |   |                          | 71,708  |   |   |   | 1,497 |   |   |   | (253 | ) |   |   | 72,952 |   |
| Marketable equity securities                              |   |                          | 1,725   |   |   |   | 256 |   |   |   | (156 | ) |   |   | 1,825 |   |
| Restricted equity securities                              |   |                          | 6,363   |   |   |   | 0 |   |   |   | 0 |   |   |   | 6,363 |   |
| Total                                                     |   | $                             | 312,729 |   |   | $ | 5,667 |   |   | $ | (8,131 | ) |   | $ | 310,265 |   |

|                                                      |   | Held-to-Maturity Securities |   |
|-----------------------------------------------------------|--------|-----------------------------|--------|
| (Amounts in thousands)                                    |   |                        |   |   | Gross |   |   | Gross |   |   | Estimated |   |
|                                                      |   | Amortized                   |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| December 31, 2010:                                        |   | Cost                        |   |   | Gains |   |   | Losses |   |   | Value |   |
| Obligations of U.S. Government Corporations and Agencies: |   |                        |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                                           |   | $                           | 142    |   |   | $ | 3 |   |   | $ | 0 |   |   | $ | 145 |   |
| Other                                                     |   |                        | 5,027  |   |   |   | 19 |   |   |   | (81 | ) |   |   | 4,965 |   |
| Obligations of state and political subdivisions           |   |                        | 1,097  |   |   |   | 0 |   |   |   | (16 | ) |   |   | 1,081 |   |
| Total                                                     |   | $                           | 6,266  |   |   | $ | 22 |   |   | $ | (97 | ) |   | $ | 6,191 |   |

----

|                   |   | March 31, 2011  |    |
|------------------------|--------|-----------------|---------|
|                   |   | U.S. Government |    |   | Obligations |   |   |   |   |   |   |   |   |   |   |
|                   |   | Agency &    |    |   | of State |   |   | Marketable |   |   | Restricted |   |   |   |   |
|                   |   | Corporation     |    |   | & Political |   |   | Equity |   |   | Equity |   |   | Corporate |   |
|                   |   | Obligations1    |    |   | Subdivisions2 |   |   | Securities3 |   |   | Securities3 |   |   | Securities |   |
| Available-For-Sale:    |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Within 1 Year:         |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $               | — |   |   | $ | 4,002 |   |   | $ | — |   |   | $ | — |   |   | $ | 13,829 |   |
| Estimated fair value   |   |            | — |   |   |   | 4,013 |   |   |   | — |   |   |   | — |   |   |   | 14,065 |   |
| Weighted average yield |   |            | — |   |   |   | 6.00 | % |   |   | — |   |   |   | — |   |   |   | 3.60 | % |
| 1 - 5 Years:           |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |            | 5,099   |   |   |   | 2,470 |   |   |   | — |   |   |   | — |   |   |   | 32,886 |   |
| Estimated fair value   |   |            | 5,099   |   |   |   | 2,458 |   |   |   | — |   |   |   | — |   |   |   | 33,525 |   |
| Weighted average yield |   |            | 1.30    | % |   |   | 4.11 | % |   |   | — |   |   |   | — |   |   |   | 3.28 | % |
| 5 - 10 Years:          |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |            | 10,002  |   |   |   | 11,271 |   |   |   | — |   |   |   | — |   |   |   | 3,057 |   |
| Estimated fair value   |   |            | 10,431  |   |   |   | 11,528 |   |   |   | — |   |   |   | — |   |   |   | 3,040 |   |
| Weighted average yield |   |            | 4.03    | % |   |   | 5.35 | % |   |   | — |   |   |   | — |   |   |   | 3.19 | % |
| After 10               |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |            | 59,367  |   |   |   | 157,313 |   |   |   | 1,725 |   |   |   | 6,046 |   |   |   | — |   |
| Estimated fair value   |   |            | 59,995  |   |   |   | 150,946 |   |   |   | 1,863 |   |   |   | 6,046 |   |   |   | — |   |
| Weighted average yield |   |            | 3.90    | % |   |   | 6.23 | % |   |   | 3.27 | % |   |   | .01 | % |   |   | — |   |
| Total:                 |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $               | 74,468  |   |   | $ | 175,056 |   |   | $ | 1,725 |   |   | $ | 6,046 |   |   | $ | 49,772 |   |
| Estimated fair value   |   |            | 75,525  |   |   |   | 168,945 |   |   |   | 1,863 |   |   |   | 6,046 |   |   |   | 50,630 |   |
| Weighted average yield |   |            | 3.74    | % |   |   | 6.14 | % |   |   | 3.27 | % |   |   | .01 | % |   |   | 3.36 | % |

----

----

|                   |   | March 31, 2011 |    |
|------------------------|--------|--------------------------|---------|
|                   |   | U.S. Government     |    |   | Obligations |   |   |   |   |   |   |   |   |   |   |
|                   |   | Agency &        |    |   | of State |   |   | Marketable |   |   | Restricted |   |   |   |   |
|                   |   | Corporation              |    |   | & Political |   |   | Equity |   |   | Equity |   |   | Corporate |   |
|                   |   | Obligations1             |    |   | Subdivisions2 |   |   | Securities3 |   |   | Securities3 |   |   | Securities |   |
| Held-To-Maturity:      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Within 1 Year:         |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                        | — |   |   | $ | 630 |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Estimated fair value   |   |                     | — |   |   |   | 628 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                     | — |   |   |   | 4.50 | % |   |   | — |   |   |   | — |   |   |   | — |   |
| 1 - 5 Years:           |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                     | 3,023   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                     | 3,028   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                     | 1.35    | % |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| 5 - 10 Years:          |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                     | 2,137   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                     | 2,088   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                     | 2.36    | % |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| After 10 Years:        |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                     | — |   |   |   | 467 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                     | — |   |   |   | 456 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                     | — |   |   |   | 7.04 | % |   |   | — |   |   |   | — |   |   |   | — |   |
| Total:                 |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                        | 5,160   |   |   | $ | 1,097 |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Estimated fair value   |   |                     | 5,116   |   |   |   | 1,084 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                     | 1.77    | % |   |   | 5.58 | % |   |   | — |   |   |   | — |   |   |   | — |   |

----

----

|                   |   | December 31, 2010 |    |
|------------------------|--------|-----------------------------|---------|
|                   |   | U.S. Government        |    |   | Obligations |   |   |   |   |   |   |   |   |   |   |
|                   |   | Agency &           |    |   | of State |   |   | Marketable |   |   | Restricted |   |   |   |   |
|                   |   | Corporation                 |    |   | & Political |   |   | Equity |   |   | Equity |   |   | Corporate |   |
|                   |   | Obligations1                |    |   | Subdivisions2 |   |   | Securities3 |   |   | Securities3 |   |   | Securities |   |
| Available-For-Sale:    |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Within 1 Year:         |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                           | — |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | 10,746 |   |
| Estimated fair value   |   |                        | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 10,845 |   |
| Weighted average yield |   |                        | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 4.32 | % |
| 1 - 5 Years:           |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | 4,056   |   |   |   | 452 |   |   |   | — |   |   |   | — |   |   |   | 57,902 |   |
| Estimated fair value   |   |                        | 4,064   |   |   |   | 467 |   |   |   | — |   |   |   | — |   |   |   | 59,069 |   |
| Weighted average yield |   |                        | 1.25    | % |   |   | 5.78 | % |   |   | — |   |   |   | — |   |   |   | 3.22 | % |
| 5 - 10 Years:          |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | 10,682  |   |   |   | 1,734 |   |   |   | — |   |   |   | — |   |   |   | 3,060 |   |
| Estimated fair value   |   |                        | 11,149  |   |   |   | 1,823 |   |   |   | — |   |   |   | — |   |   |   | 3,040 |   |
| Weighted average yield |   |                        | 4.08    | % |   |   | 6.05 | % |   |   | — |   |   |   | — |   |   |   | 3.19 | % |
| After 10               |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | 36,014  |   |   |   | 179,995 |   |   |   | 1,725 |   |   |   | 6,363 |   |   |   | — |   |
| Estimated fair value   |   |                        | 36,660  |   |   |   | 174,962 |   |   |   | 1,825 |   |   |   | 6,363 |   |   |   | — |   |
| Weighted average yield |   |                        | 4.03    | % |   |   | 6.14 | % |   |   | 2.54 | % |   |   | .95 | % |   |   | — |   |
| Total:                 |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                           | 50,752  |   |   | $ | 182,181 |   |   | $ | 1,725 |   |   | $ | 6,363 |   |   | $ | 71,708 |   |
| Estimated fair value   |   |                        | 51,873  |   |   |   | 177,252 |   |   |   | 1,825 |   |   |   | 6,363 |   |   |   | 72,952 |   |
| Weighted average yield |   |                        | 3.82    | % |   |   | 6.14 | % |   |   | 2.54 | % |   |   | .95 | % |   |   | 3.38 | % |

----

----

|                   |   | December 31, 2010 |    |
|------------------------|--------|-----------------------------|---------|
|                   |   | U.S. Government        |    |   | Obligations |   |   |   |   |   |   |   |   |   |   |
|                   |   | Agency &           |    |   | of State |   |   | Marketable |   |   | Restricted |   |   |   |   |
|                   |   | Corporation                 |    |   | & Political |   |   | Equity |   |   | Equity |   |   | Corporate |   |
|                   |   | Obligations1                |    |   | Subdivisions2 |   |   | Securities3 |   |   | Securities3 |   |   | Securities |   |
| Held-To-Maturity:      |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Within 1 Year:         |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                           | — |   |   | $ | 630 |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Estimated fair value   |   |                        | — |   |   |   | 628 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                        | — |   |   |   | 4.49 | % |   |   | — |   |   |   | — |   |   |   | — |   |
| 1 - 5 Years:           |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | 3,027   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                        | 3,030   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                        | 3.83    | % |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| 5 - 10 Years:          |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | 2,142   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                        | 2,080   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                        | 2.37    | % |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| After 10 Years:        |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   |                        | — |   |   |   | 467 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Estimated fair value   |   |                        | — |   |   |   | 453 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                        | — |   |   |   | 7.04 | % |   |   | — |   |   |   | — |   |   |   | — |   |
| Total:                 |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortized cost         |   | $                           | 5,169   |   |   | $ | 1,097 |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Estimated fair value   |   |                        | 5,110   |   |   |   | 1,081 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted average yield |   |                        | 3.22    | % |   |   | 5.58 | % |   |   | — |   |   |   | — |   |   |   | — |   |

----

----

|                             |   | Less Than 12 Months |    |   | 12 Months or More |   |   | Total  |   |
|----------------------------------|--------|------------------------------------|---------|--------|----------------------------------|--------|--------|--------|--------|
|                             |   | Fair                               |    |   | Unrealized                       |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| (Amounts in thousands) |   | Value                              |    |   | Loss                             |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                             |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Direct obligations of the        |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government                  |   | $                                  | 6,984   |   |                             | $      | 97     |   |   | $ | — |   |   | $ | — |   |   | $ | 6,984 |   |   | $ | 97 |   |
| Federal Agency                   |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Backed Securities                |   |                               | 27,422  |   |                             |   | 148    |   |   |   | — |   |   |   | — |   |   |   | 27,422 |   |   |   | 148 |   |
| Municipal Bonds                  |   |                               | 88,649  |   |                             |   | 3,651  |   |   |   | 12,797 |   |   |   | 4,146 |   |   |   | 101,446 |   |   |   | 7,797 |   |
| Corporate Securities             |   |                               | 12,871  |   |                             |   | 143    |   |   |   | — |   |   |   | — |   |   |   | 12,871 |   |   |   | 143 |   |
| Equities                         |   |                               | 288     |   |                             |   | 22     |   |   |   | 618 |   |   |   | 111 |   |   |   | 906 |   |   |   | 133 |   |
|                             |   | $                                  | 136,214 |   |                             | $      | 4,061  |   |   | $ | 13,415 |   |   | $ | 4,257 |   |   | $ | 149,629 |   |   | $ | 8,318 |   |

----

|                             |   | Less Than 12 Months |    |   | 12 Months or More |   |   | Total  |   |
|----------------------------------|--------|------------------------------------|---------|--------|----------------------------------|--------|--------|--------|--------|
|                             |   | Fair                               |    |   | Unrealized                       |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| (Amounts in thousands) |   | Value                              |    |   | Loss                             |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                             |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Direct obligations of the        |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government                  |   | $                                  | 7,925   |   |                             | $      | 111    |   |   | $ | — |   |   | $ | — |   |   | $ | 7,925 |   |   | $ | 111 |   |
| Federal Agency                   |   |                               |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Backed Securities                |   |                               | 4,859   |   |                             |   | 146    |   |   |   | — |   |   |   | — |   |   |   | 4,859 |   |   |   | 146 |   |
| Municipal Bonds                  |   |                               | 90,995  |   |                             |   | 3,239  |   |   |   | 13,160 |   |   |   | 4,323 |   |   |   | 104,155 |   |   |   | 7,562 |   |
| Corporate Securities             |   |                               | 18,414  |   |                             |   | 253    |   |   |   | — |   |   |   | — |   |   |   | 18,414 |   |   |   | 253 |   |
| Equities                         |   |                               | 98      |   |                             |   | 27     |   |   |   | 645 |   |   |   | 129 |   |   |   | 743 |   |   |   | 156 |   |
|                             |   | $                                  | 122,291 |   |                             | $      | 3,776  |   |   | $ | 13,805 |   |   | $ | 4,452 |   |   | $ | 136,096 |   |   | $ | 8,228 |   |

|                                    |   | March 31, |    |   | December 31, |   |
|-----------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                    |   | 2011           |    |   | 2010              |   |
| Commercial, Financial, and Agricultural |   | $              | 28,714  |   |              | $      | 29,693 |   |
| Tax-exempt                              |   |           | 13,928  |   |              |   | 12,450 |   |
| Real estate mortgages - Held-for-sale   |   |           | 4,545   |   |              |   | 4,950 |   |
| Real estate mortgages - Consumer        |   |           | 126,515 |   |              |   | 127,031 |   |
| Real estate mortgages - Commercial      |   |           | 227,719 |   |              |   | 227,147 |   |
| Consumer                                |   |           | 8,892   |   |              |   | 8,781 |   |
| Gross loans                             |   | $              | 410,313 |   |              | $      | 410,052 |   |
| Add (deduct): Unearned discount         |   |           | (601    | )      |              |   | (675 | ) |
|   Net deferred loan fees and costs |   |           | 285     |   |              |   | 274 |   |
| Loans, net of unearned income           |   | $              | 409,997 |   |              | $      | 409,651 |   |

----

|                            |   | March 31, |   |   | December 31, |   |
|---------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                            |   | 2011           |   |   | 2010              |   |
| Balance, January 1              |   | $              | 5,701  |   |              | $      | 5,322 |   |
| Provision charged to operations |   |           | 300    |   |              |   | 2,575 |   |
| Loans charged off               |   |           | (151   | )      |              |   | (2,262 | ) |
| Recoveries                      |   |           | 11     |   |              |   | 66 |   |
| Balance, December 31            |   | $              | 5,861  |   |              | $      | 5,701 |   |

|                                      |   | Commercial & |    |   | Commercial Real Estate |   |
|-------------------------------------------|--------|-----------------------|---------|--------|----------------------------------|--------|
|                                      |   | Industrial            |    |   | Construction                     |   |
|                                      |   | March 31,        |    |   | December 31,                |   |   | March 31, |   |   | December 31, |   |
|                                      |   | 2011                  |    |   | 2010                             |   |   | 2011 |   |   | 2010 |   |
| Grade:                                    |   |                  |    |   |                             |   |   |   |   |   |   |   |
| 1-6 Pass                                  |   | $                     | 39,265  |   |                             | $      | 37,991 |   |   | $ | 5,203 |   |   | $ | 5,111 |   |
| 7    Special Mention  |   |                  | 610     |   |                             |   | 1,330 |   |   |   | — |   |   |   | — |   |
| 8    Substandard      |   |                  | 947     |   |                             |   | 991 |   |   |   | 578 |   |   |   | 433 |   |
| 9    Doubtful         |   |                  | 224     |   |                             |   | 227 |   |   |   | — |   |   |   | — |   |
| Add (deduct): Unearned discount           |   |                  | — |   |                             |   | — |   |   |   | — |   |   |   | — |   |
|   Net deferred loan fees & costs |   |                  | 83      |   |                             |   | 74 |   |   |   | (10 | ) |   |   | (13 | ) |
| Loans, net of unearned income             |   | $                     | 41,129  |   |                             | $      | 40,603 |   |   | $ | 5,771 |   |   | $ | 5,531 |   |

|                                      |   | Commercial Real Estate |    |   | Residential Real Estate |   |
|-------------------------------------------|--------|----------------------------------|---------|--------|-----------------------------------|--------|
|                                      |   | Other                            |    |   | Including Home Equity   |   |
|                                      |   | March 31,                   |    |   | December 31,                 |   |   | March 31, |   |   | December 31, |   |
|                                      |   | 2011                             |    |   | 2010                              |   |   | 2011 |   |   | 2010 |   |
| Grade:                                    |   |                             |    |   |                              |   |   |   |   |   |   |   |
| 1-6 Pass                                  |   | $                                | 209,933 |   |                              | $      | 205,941 |   |   | $ | 129,689 |   |   | $ | 130,477 |   |
| 7    Special Mention  |   |                             | 2,943   |   |                              |   | 8,308 |   |   |   | — |   |   |   | 191 |   |
| 8    Substandard      |   |                             | 10,658  |   |                              |   | 8,958 |   |   |   | 1,371 |   |   |   | 1,313 |   |
| 9    Doubtful         |   |                             | — |   |                              |   | — |   |   |   | — |   |   |   | — |   |
| Add (deduct): Unearned discount           |   |                             | — |   |                              |   | — |   |   |   | — |   |   |   | — |   |
|   Net deferred loan fees & costs |   |                             | 51      |   |                              |   | 35 |   |   |   | 71 |   |   |   | 82 |   |
| Loans, net of unearned income             |   | $                                | 223,585 |   |                              | $      | 223,252 |   |   | $ | 131,131 |   |   | $ | 132,063 |   |

|                                      |   | Consumer Loans |    |
|-------------------------------------------|--------|---------------------|---------|
|                                      |   | March 31,      |    |   | December 31, |   |
|                                      |   | 2011                |    |   | 2010 |   |
| Grade:                                    |   |                |    |   |   |   |
| 1-6 Pass                                  |   | $                   | 8,885   |   |   | $ | 8,781 |   |
| 7    Special Mention  |   |                |    |   |   |   |  — |   |
| 8    Substandard      |   |                | 7       |   |   |   | — |   |
| 9    Doubtful         |   |                | — |   |   |   | — |   |
| Add (deduct): Unearned discount           |   |                | (601    | ) |   |   | (675 | ) |
|   Net deferred loan fees & costs |   |                | 90      |   |   |   | 96 |   |
| Loans, net of unearned income             |   | $                   | 8,381   |   |   | $ | 8,202 |   |

----

----

| (Amounts in thousands)                                 |   |       |   |   | Commercial       |   |    |     |   |   |        |   |   |        |    |   |   |   |
|------------------------------------------------------------------|--------|------------|--------|--------|------------------|--------|---------|----------|--------|--------|-------------|--------|--------|-------------|---------|--------|--------|--------|
|                                                             |   | Commercial |   |   | Real Estate |   |    | Consumer |   |   | Residential |   |   | Unallocated |    |   | Total  |   |
| March 31, 2011:                                                  |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |
| Allowance for Credit Losses:                                     |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |
| Beginning balance                                                |   | $          | 565    |   |             | $      | 2,769   |     |   | $      | 123         |   |   | $           | 1,501   |   |   | $      | 743 |   |   | $ | 5,701 |   |
| Charge-offs                                                      |   |       | (128   | )      |             |   | — |     |   |   | (23         | )      |   |        | — |   |   |   | — |   |   |   | (151 | ) |
| Recoveries                                                       |   |       | 6      |   |             |   | — |     |   |   | 4           |   |   |        | 1       |   |   |   | — |   |   |   | 11 |   |
| Provision                                                        |   |       | 175    |   |             |   | (317    | )        |   |   | 73          |   |   |        | 471     |   |   |   | (102 | ) |   |   | 300 |   |
| Ending Balance                                                   |   | $          | 618    |   |             | $      | 2,452   |     |   | $      | 177         |   |   | $           | 1,973   |   |   | $      | 641 |   |   | $ | 5,861 |   |
| Ending balance: individually evaluated  for impairment |   |       | 224    |   |             |   | 512     |     |   |   | —     |   |   |        | 22      |   |   |   | — |   |   |   | 758 |   |
| Ending balance: collectively evaluated for impairment            |   | $          | 394    |   |             | $      | 1,939   |     |   | $      | 177         |   |   | $           | 1,952   |   |   | $      | 641 |   |   | $ | 5,103 |   |
|                                                             |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |   |   |   |   |   |   |
| Financing Receivables:                                           |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |   |   |   |   |   |   |
| Ending Balance                                                   |   | $          | 41,128 |   |             | $      | 180,798 |     |   | $      | 8,382       |   |   | $           | 179,689 |   |   | $      | — |   |   | $ | 409,997 |   |
| Ending balance: individually evaluated for impairment            |   |       | 224    |   |             |   | 2,570   |     |   |   | —     |   |   |        | 1,301   |   |   |   | — |   |   |   | 4,095 |   |
| Ending balance: collectively evaluated for impairment            |   | $          | 40,904 |   |             | $      | 178,228 |     |   | $      | 8,382       |   |   | $           | 178,388 |   |   | $      | — |   |   | $ | 405,902 |   |

----

| (Amounts in thousands)                                 |   |       |   |   | Commercial       |   |    |     |   |   |        |   |   |        |    |   |   |   |
|------------------------------------------------------------------|--------|------------|--------|--------|------------------|--------|---------|----------|--------|--------|-------------|--------|--------|-------------|---------|--------|--------|--------|
|                                                             |   | Commercial |   |   | Real Estate |   |    | Consumer |   |   | Residential |   |   | Unallocated |    |   | Total  |   |
| December 31, 2010:                                               |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |
| Allowance for Credit Losses:                                     |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |
| Beginning balance                                                |   | $          | 970    |   |             | $      | 2,213   |     |   | $      | 99          |   |   | $           | 1,734   |   |   | $      | 306 |   |   | $ | 5,322 |   |
| Charge-offs                                                      |   |       | (389   | )      |             |   | (1,585  | )        |   |   | (95         | )      |   |        | (193    | )      |   |   | — |   |   |   | (2,262 | ) |
| Recoveries                                                       |   |       | 38     |   |             |   | 13      |     |   |   | 14          |   |   |        | 1       |   |   |   | — |   |   |   | 66 |   |
| Provision                                                        |   |       | (54    | )      |             |   | 2,128   |     |   |   | 105         |   |   |        | (41     | )      |   |   | 437 |   |   |   | 2,575 |   |
| Ending Balance                                                   |   | $          | 565    |   |             | $      | 2,769   |     |   | $      | 123         |   |   | $           | 1,501   |   |   | $      | 743 |   |   | $ | 5,701 |   |
| Ending balance: individually evaluated  for impairment |   |       | 296    |   |             |   | 309     |     |   |   | —     |   |   |        | — |   |   |   | — |   |   |   | 605 |   |
| Ending balance: collectively evaluated for impairment            |   | $          | 269    |   |             | $      | 2,460   |     |   | $      | 123         |   |   | $           | 1,501   |   |   | $      | 743 |   |   | $ | 5,096 |   |
|                                                             |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |   |   |   |   |   |   |
| Financing Receivables:                                           |   |       |   |   |             |   |    |     |   |   |        |   |   |        |    |   |   |   |   |   |   |   |   |   |
| Ending Balance                                                   |   | $          | 20,969 |   |             | $      | 199,878 |     |   | $      | 7,357       |   |   | $           | 181,447 |   |   | $      |   |   |   | $ | 409,651 |   |
| Ending balance: individually evaluated for impairment            |   |       | 381    |   |             |   | 3,109   |     |   |   | —     |   |   |        | 787     |   |   |   | — |   |   |   | 4,276 |   |
| Ending balance: collectively evaluated for impairment            |   | $          | 20,588 |   |             | $      | 196,769 |     |   | $      | 7,357       |   |   | $           | 180,660 |   |   | $      | — |   |   | $ | 405,375 |   |

|                           |   | March 31, |    |   | December 31, |   |
|--------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                           |   | 2011           |    |   | 2010              |   |
| Gross interest due under terms |   | $              | 369     |   |              | $      | 316 |   |
| Amount included in income      |   |           | — |   |              |   | (63 | ) |
| Interest income not recognized |   | $              | 369     |   |              | $      | 253 |   |

| (Amounts in thousands)    |   |       |    |   | Unpaid    |   |    |      |   |   | Average    |   |   | Interest   |    |
|-------------------------------------|--------|------------|---------|--------|-----------|--------|---------|-----------|--------|--------|------------|--------|--------|------------|---------|
|                                |   | Recorded   |    |   | Principal |   |    | Related   |   |   | Recorded   |   |   | Income     |    |
|                                |   | Investment |    |   | Balance   |   |    | Allowance |   |   | Investment |   |   | Recognized |    |
| March 31, 2011:           |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |
| With no related allowance recorded: |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |
| Commercial                          |   | $          | — |   |      | $      | — |      |   | $      | —    |   |   | $          | — |   |   | $ | — |   |
| Commercial real estate              |   |       | 665     |   |      |   | 708     |      |   |   | —    |   |   |       | 673     |   |   |   | — |   |
| Residential                         |   |       | 734     |   |      |   | 804     |      |   |   | —    |   |   |       | 736     |   |   |   | — |   |
|                                |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| With an allowance recorded:         |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Commercial                          |   |       | 224     |   |      |   | 224     |      |   |   | 224        |   |   |       | 229     |   |   |   | — |   |
| Commercial real estate              |   |       | 2,382   |   |      |   | 2,754   |      |   |   | 526        |   |   |       | 2,571   |   |   |   | — |   |
| Residential                         |   |       | 90      |   |      |   | 90      |      |   |   | 8          |   |   |       | 90      |   |   |   | — |   |
| Total                               |   | $          | 4,095   |   |      | $      | 4,580   |      |   | $      | 758        |   |   | $          | 4,299   |   |   | $ | — |   |
|                                |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Total consists of:                  |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Commercial                          |   | $          | 224     |   |      | $      | 224     |      |   | $      | 224        |   |   | $          | 229     |   |   | $ | — |   |
| Commercial real estate              |   | $          | 3,047   |   |      | $      | 3,462   |      |   | $      | 526        |   |   | $          | 3,244   |   |   | $ | — |   |
| Residential                         |   | $          | 824     |   |      | $      | 894     |      |   | $      | 8          |   |   | $          | 826     |   |   | $ | — |   |

----

| (Amounts in thousands)    |   |       |    |   | Unpaid    |   |    |      |   |   | Average    |   |   | Interest   |    |
|-------------------------------------|--------|------------|---------|--------|-----------|--------|---------|-----------|--------|--------|------------|--------|--------|------------|---------|
|                                |   | Recorded   |    |   | Principal |   |    | Related   |   |   | Recorded   |   |   | Income     |    |
|                                |   | Investment |    |   | Balance   |   |    | Allowance |   |   | Investment |   |   | Recognized |    |
| December 31, 2010:        |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |
| With no related allowance recorded: |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |
| Commercial                          |   | $          | 29      |   |      | $      | 29      |      |   | $      | —    |   |   | $          | 29      |   |   | $ | — |   |
| Commercial real estate              |   |       | 907     |   |      |   | 942     |      |   |   | —    |   |   |       | 937     |   |   |   | 14 |   |
| Residential                         |   |       | 787     |   |      |   | 866     |      |   |   | —    |   |   |       | 785     |   |   |   | 19 |   |
|                                |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| With an allowance recorded:         |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Commercial                          |   |       | 352     |   |      |   | 352     |      |   |   | 296        |   |   |       | 356     |   |   |   | 7 |   |
| Commercial real estate              |   |       | 2,201   |   |      |   | 2,641   |      |   |   | 309        |   |   |       | 2,398   |   |   |   | 23 |   |
| Residential                         |   |       | — |   |      |   | — |      |   |   | —    |   |   |       | — |   |   |   | — |   |
| Total                               |   | $          | 4,276   |   |      | $      | 4,830   |      |   | $      | 605        |   |   | $          | 4,505   |   |   | $ | 63 |   |
|                                |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Total consists of:                  |   |       |    |   |      |   |    |      |   |   |       |   |   |       |    |   |   |   |   |   |
| Commercial                          |   | $          | 381     |   |      | $      | 381     |      |   | $      | 296        |   |   | $          | 385     |   |   | $ | 7 |   |
| Commercial real estate              |   | $          | 3,108   |   |      | $      | 3,583   |      |   | $      | 309        |   |   | $          | 3,335   |   |   | $ | 37 |   |
| Residential                         |   | $          | 787     |   |      | $      | 866     |      |   | $      | —    |   |   | $          | 785     |   |   | $ | 19 |   |

|                                              |   | March 31, |    |   | December 31, |   |
|---------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                              |   | 2011           |    |   | 2010              |   |
| Commercial - R/E                                  |   | $              | 3,047   |   |              | $      | 3,108 |   |
| Commercial - other                                |   |           | 224     |   |              |   | 381 |   |
| Residential                                       |   |           | 824     |   |              |   | 787 |   |
| Consumer                                          |   |           | — |   |              |   | — |   |
| Total non-accruing loans                          |   | $              | 4,095   |   |              | $      | 4,276 |   |
| Restructured loans                                |   |           | — |   |              |   | — |   |
| Total impaired loans                              |   | $              | 4,095   |   |              | $      | 4,276 |   |
| Loans past-due 90 days or more and still accruing |   |           | 7       |   |              |   | — |   |
| Foreclosed assets                                 |   |           | 1,472   |   |              |   | 1,149 |   |
| Total non-performing assets                       |   | $              | 5,574   |   |              | $      | 5,425 |   |

----

| (Amounts in thousands) |   |            |   |   |            |   |   |              |   |   |          |   |   |    |   |   | Total       |   |
|----------------------------------|--------|-----------------|--------|--------|-----------------|--------|--------|-------------------|--------|--------|---------------|--------|--------|---------|--------|--------|-------------|--------|
|                             |   | 30-59 Days |   |   | 60-89 Days |   |   | Greater Than |   |   | Total         |   |   |    |   |   | Financing   |   |
|                             |   | Past Due   |   |   | Past Due   |   |   | 90 Days      |   |   | Past Due |   |   | Current |   |   | Receivables |   |
| March 31, 2011:                  |   |            |   |   |            |   |   |              |   |   |          |   |   |    |   |   |        |   |
| Commercial                       |   | $               | 89     |   |            | $      | 49     |              |   | $      | —       |   |   | $       | 138    |   |        | $      | 40,990 |   |   | $ | 41,128 |   |
| Commercial real estate           |   |            | 1,405  |   |            |   | 512    |              |   |   | —       |   |   |    | 1,917  |   |        |   | 178,881 |   |   |   | 180,798 |   |
| Consumer                         |   |            | 90     |   |            |   | 4      |              |   |   | 7             |   |   |    | 101    |   |        |   | 8,281 |   |   |   | 8,382 |   |
| Residential                      |   |            | 1,028  |   |            |   | 135    |              |   |   | —       |   |   |    | 1,163  |   |        |   | 178,526 |   |   |   | 179,689 |   |
| Total                            |   | $               | 2,612  |   |            | $      | 700    |              |   | $      | 7             |   |   | $       | 3,319  |   |        | $      | 406,678 |   |   | $ | 409,997 |   |

| (Amounts in thousands) |   |            |   |   |            |   |   |              |   |   |          |   |   |    |   |   | Total       |   |
|----------------------------------|--------|-----------------|--------|--------|-----------------|--------|--------|-------------------|--------|--------|---------------|--------|--------|---------|--------|--------|-------------|--------|
|                             |   | 30-59 Days |   |   | 60-89 Days |   |   | Greater Than |   |   | Total         |   |   |    |   |   | Financing   |   |
|                             |   | Past Due   |   |   | Past Due   |   |   | 90 Days      |   |   | Past Due |   |   | Current |   |   | Receivables |   |
| December 31, 2010:               |   |            |   |   |            |   |   |              |   |   |          |   |   |    |   |   |        |   |
| Commercial                       |   | $               | 740    |   |            | $      | 101    |              |   | $      | —       |   |   | $       | 842    |   |        | $      | 34,758 |   |   | $ | 35,600 |   |
| Commercial real estate           |   |            | 999    |   |            |   | 2,149  |              |   |   | —       |   |   |    | 3,148  |   |        |   | 230,638 |   |   |   | 233,786 |   |
| Consumer                         |   |            | 75     |   |            |   | 1      |              |   |   | —       |   |   |    | 76     |   |        |   | 8,127 |   |   |   | 8,203 |   |
| Residential                      |   |            | 1,212  |   |            |   | 155    |              |   |   | —       |   |   |    | 1,367  |   |        |   | 133,696 |   |   |   | 132,062 |   |
| Total                            |   | $               | 3,026  |   |            | $      | 2,408  |              |   | $      | —       |   |   | $       | 5,433  |   |        | $      | 404,219 |   |   | $ | 409,651 |   |

----

| NOTE 7. | FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONSOF CREDIT RISK |
|---------|------------------------------------------------------------------------------------|

| (amounts in thousands)                                    |   | March 31, |   |   | December 31, |   |
|---------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                                                                |   | 2011           |   |   | 2010              |   |
| Financial instruments whose contract amounts represent credit risk: |   |           |   |   |              |   |
| Commitments to extend credit                                        |   | $              | 61,526 |   |              | $      | 55,551 |   |
| Financial standby letters of credit                                 |   |           | 937    |   |              |   | 805 |   |
| Performance standby letters of credit                               |   |           | 4,619  |   |              |   | 5,315 |   |

----

|   | A. | Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Bank for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Level 2: Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices that are not active for identical or similar assets and other observable inputs. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Level 3: Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows and other similar techniques. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| March 31, 2011                        |   | Level 1 |    |   | Level 2 |   |    | Level 3 |   |   | Total   |   |
|-------------------------------------------------|--------|--------------|---------|--------|--------------|--------|---------|--------------|--------|--------|---------|--------|
| Available for Sale Securities                   |   |         |    |   |         |   |    |         |   |   |    |   |
| Obligations of US Government Agencies           |   |         |    |   |         |   |    |         |   |   |    |   |
| Mortgaged-backed                                |   | $            | — |   |         | $      | 67,402  |         |   | $      | — |   |   | $ | 67,402 |   |
| Other                                           |   |         | — |   |         |   | 8,124   |         |   |   | — |   |   |   | 8,124 |   |
| Obligations of state and political subdivisions |   |         | — |   |         |   | 168,869 |         |   |   | — |   |   |   | 168,945 |   |
| Corporate securities                            |   |         | — |   |         |   | 50,629  |         |   |   | — |   |   |   | 50,629 |   |
| Equity securities                               |   |         | 1,863   |   |         |   | — |         |   |   | — |   |   |   | 1,863 |   |
| Restricted equity securities                    |   |         | — |   |         |   | 6,046   |         |   |   | — |   |   |   | 6,046 |   |
|                                            |   | $            | 1,863   |   |         | $      | 301,070 |         |   | $      | — |   |   | $ | 303,009 |   |
|                                            |   |         |    |   |         |   |    |         |   |   |    |   |   |   |   |   |
| December 31, 2010                               |   | Level 1      |    |   | Level 2      |   |    | Level 3      |   |   | Total   |   |
| Available for Sale Securities                   |   |         |    |   |         |   |    |         |   |   |    |   |   |   |   |   |
| Obligations of US Government Agencies           |   |         |    |   |         |   |    |         |   |   |    |   |   |   |   |   |
| Mortgaged-backed                                |   | $            | — |   |         | $      | 44,777  |         |   | $      | — |   |   | $ | 44,777 |   |
| Other                                           |   |         | — |   |         |   | 7,096   |         |   |   | — |   |   |   | 7,096 |   |
| Obligations of state and political subdivisions |   |         | — |   |         |   | 177,252 |         |   |   | — |   |   |   | 177,252 |   |
| Corporate securities                            |   |         | — |   |         |   | 72,952  |         |   |   | — |   |   |   | 72,952 |   |
| Equity securities                               |   |         | 1,825   |   |         |   | — |         |   |   | — |   |   |   | 1,825 |   |
| Restricted equity securities                    |   |         | — |   |         |   | 6,363   |         |   |   | — |   |   |   | 6,363 |   |
|                                            |   | $            | 1,825   |   |         | $      | 308,440 |         |   | $      | — |   |   | $ | 310,265 |   |

----

----

| March 31, 2011                  |   | Level 1 |    |   | Level 2 |   |    | Level 3 |   |   | Total |   |
|---------------------------------|--------|---------|---------|--------|---------|--------|---------|---------|--------|--------|-------|--------|
| Impaired loans                  |   | $       | — |   |    | $      | — |    |   | $      | 4,095 |   |   | $ | 4,095 |   |
| Foreclosed assets held for sale |   |    | — |   |    |   | — |    |   |   | 1,472 |   |   |   | 1,472 |   |
| Loans held for sale             |   |    | — |   |    |   | — |    |   |   | 4,545 |   |   |   | 4,545 |   |

| December 31, 2010               |   | Level 1 |    |   | Level 2 |   |    | Level 3 |   |   | Total |   |
|---------------------------------|--------|---------|---------|--------|---------|--------|---------|---------|--------|--------|-------|--------|
| Impaired loans                  |   | $       | — |   |    | $      | — |    |   | $      | 4,276 |   |   | $ | 4,276 |   |
| Foreclosed assets held for sale |   |    | — |   |    |   | — |    |   |   | 1,149 |   |   |   | 1,149 |   |
| Loans held for sale             |   |    | — |   |    |   | — |    |   |   | 4,950 |   |   |   | 4,950 |   |

| (Amounts in thousands)                     |   | March 31, 2011 |    |   | December 31, |   |
|--------------------------------------------|--------|----------------|---------|--------|--------------|--------|
|                                       |   | 2011           |    |   | 2010         |   |
|                                       |   | Carrying       |    |   | Estimated    |   |   | Carrying |   |   | Estimated |   |
|                                       |   | Amount         |    |   | Fair Value   |   |   | Amount |   |   | Fair Value |   |
| FINANCIAL ASSETS:                          |   |           |    |   |         |   |   |   |   |   |   |   |
| Cash and cash equivalents                  |   | $              | 8,072   |   |         | $      | 8,072 |   |   | $ | 4,346 |   |   | $ | 4,346 |   |
| Short-term investments                     |   |           | 22,340  |   |         |   | 22,340 |   |   |   | 7,559 |   |   |   | 7,559 |   |
| Investment securities - available for sale |   |           | 296,963 |   |         |   | 296,963 |   |   |   | 310,265 |   |   |   | 310,265 |   |
| Investment securities - held to maturity   |   |           | 6,257   |   |         |   | 6,199 |   |   |   | 6,266 |   |   |   | 6,191 |   |
| Net loans                                  |   |           | 404,136 |   |         |   | 416,499 |   |   |   | 403,950 |   |   |   | 408,984 |   |
| Accrued interest receivable                |   |           | 4,278   |   |         |   | 4,278 |   |   |   | 4,589 |   |   |   | 4,589 |   |
| Cash surrender value of life insurance     |   |           | 18,578  |   |         |   | 18,578 |   |   |   | 18,388 |   |   |   | 18,388 |   |
|                                       |   |           |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| FINANCIAL LIABILITIES:                     |   |           |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                   |   |           | 626,349 |   |         |   | 603,481 |   |   |   | 626,895 |   |   |   | 610,632 |   |
| Short-term borrowings                      |   |           | 24,734  |   |         |   | 24,734 |   |   |   | 20,977 |   |   |   | 20,977 |   |
| Long-term borrowings                       |   |           | 71,385  |   |         |   | 74,619 |   |   |   | 66,400 |   |   |   | 69,869 |   |
| Accrued interest and other expenses        |   |           | 3,258   |   |         |   | 3,258 |   |   |   | 2,976 |   |   |   | 2,976 |   |
|                                       |   |           |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:   |   |           |    |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit               |   |           |    |   |         |   | 61,526 |   |   |   |   |   |   |   | 55,551 |   |
| Financial standby letters of credit        |   |           |    |   |         |   | 937 |   |   |   |   |   |   |   | 805 |   |
| Performance standby letters of credit      |   |           |    |   |         |   | 4,619 |   |   |   |   |   |   |   | 5,315 |   |

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| NOTE 9. | MANAGEMENT'S ASSERTIONS AND COMMENTS REQUIRED TO BE PROVIDEDWITH FORM 10Q FILING |
|---------|----------------------------------------------------------------------------------|

----

----

| Item 2. | First Keystone Corporation Management's Discussion and Analysis of Financial Condition and Results of Operation as of March 31, 2011 |
|---------|--------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| (Amounts in thousands)                             |   | March 31, |    |   | December 31, |   |
|----------------------------------------------------|--------|-----------|---------|--------|--------------|--------|
|                                               |   | 2011      |    |   | 2010         |   |
| Commercial, financial and agricultural:            |   |      |    |   |         |   |
| Commercial secured by real estate                  |   | $         | 227,719 |   |         | $      | 227,147 |   |
| Commercial - other                                 |   |      | 28,714  |   |         |   | 29,693 |   |
| Tax exempt - real estate and other                 |   |      | 13,928  |   |         |   | 12,450 |   |
| Real estate (primarily residential mortgage loans) |   |      | 131,060 |   |         |   | 131,981 |   |
| Consumer loans                                     |   |      | 8,892   |   |         |   | 8,781 |   |
| Total Gross Loans                                  |   | $         | 410,313 |   |         | $      | 410,052 |   |
| Less:  Unearned income and                    |   |      |    |   |         |   |   |   |
| unamortized loan fees net of costs                 |   |      | 316     |   |         |   | 401 |   |
| Total Loans, net of unearned income                |   | $         | 409,997 |   |         | $      | 409,651 |   |

----

|                                                                                           |   | March 31, |    |   | December 31, |   |    | March 31, |   |
|------------------------------------------------------------------------------------------------|--------|-----------|---------|--------|--------------|--------|---------|-----------|--------|
|                                                                                           |   | 2011      |    |   | 2010         |   |    | 2010      |   |
| Balance at beginning of period                                                                 |   | $         | 5,701   |   |         | $      | 5,322   |      |   | $ | 5,322 |   |
| Charge-offs:                                                                                   |   |      | 128     |   |         |   | 389     |      |   |   | 175 |   |
| Commercial, financial, and agricultural                                                        |   |      | — |   |         |   | 1,778   |      |   |   | 4 |   |
| Real estate                                                                                    |   |      | 23      |   |         |   | 95      |      |   |   | 17 |   |
| Consumer                                                                                       |   |      | 151     |   |         |   | 2,262   |      |   |   | 197 |   |
| Recoveries:                                                                                    |   |      |    |   |         |   |    |      |   |   |   |   |
| Commercial, financial, and agricultural                                                        |   |      | 6       |   |         |   | 39      |      |   |   | — |   |
| Real estate                                                                                    |   |      | 1       |   |         |   | 13      |      |   |   | 1 |   |
| Consumer                                                                                       |   |      | 4       |   |         |   | 14      |      |   |   | 6 |   |
|                                                                                           |   |      | 11      |   |         |   | 66      |      |   |   | 7 |   |
|                                                                                           |   |      |    |   |         |   |    |      |   |   |   |   |
| Net charge-offs                                                                                |   |      | 140     |   |         |   | 2,196   |      |   |   | 190 |   |
| Additions charged to operations                                                                |   |      | 300     |   |         |   | 2,575   |      |   |   | 200 |   |
| Allowance purchased                                                                            |   |      | — |   |         |   | — |      |   |   | — |   |
| Balance at end of period                                                                       |   | $         | 5,861   |   |         | $      | 5,701   |      |   | $ | 5,332 |   |
|                                                                                           |   |      |    |   |         |   |    |      |   |   |   |   |
| Ratio of net charge-offs during the period to average loans outstanding during the period |   |      | 0.03    | %      |         |   | 0.5     | %         |   |   | 0.05 | % |
| Allowance for loan losses to average loans outstanding during the period                       |   |      | 1.43    | %      |         |   | 1.39    | %         |   |   | 1.32 | % |

----

| (Amounts in thousands)                  |   | March 31, |   |   | December 31, |   |
|-----------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                    |   | 2011      |   |   | 2010         |   |
| Commercial, financial, and agricultural |   | $         | 618    |   |         |   | 11.8 | %* |   | $ | 565 |   |   |   | 11.4 | %* |
| Real estate - mortgage                  |   |      | 4,425  |   |         |   | 84.8 | %* |   |   | 4,270 |   |   |   | 86.1 | %* |
| Consumer and other loans                |   |      | 177    |   |         |   | 3.4 | %* |   |   | 123 |   |   |   | 2.5 | %* |
| Unallocated                             |   |      | 641    |   |         |   | N/A | * |   |   | 743 |   |   |   | N/A | * |
|                                    |   | $         | 5,861  |   |         |   | 100.0 | %* |   | $ | 5,701 |   |   |   | 100.0 | %* |

----

----

| (Amounts in thousands)                                          |   | March 31, |   |   | December 31, |   |
|-----------------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
|                                                            |   | 2011      |   |   | 2010         |   |
| Non-performing assets                                           |   |      |   |   |         |   |
| Impaired loans                                                  |   | $         | 4,095  |   |         | $      | 4,276 |   |
| Foreclosed assets held for resale                               |   |      | 1,472  |   |         |   | 1,149 |   |
| Loans past-due 90 days or more and still accruing interest      |   |      | 7      |   |         |   | — |   |
| Total non-performing assets                                     |   | $         | 5,574  |   |         | $      | 5,425 |   |
|                                                            |   |      |   |   |         |   |   |   |
| Impaired loans                                                  |   |      |   |   |         |   |   |   |
| Non-performing loans                                            |   | $         | 4,095  |   |         | $      | 4,276 |   |
| Allocated allowance for loan losses                             |   |      | (758   | )      |         |   | (605 | ) |
| Net investment in impaired loans                                |   | $         | 3,337  |   |         | $      | 3,671 |   |
|                                                            |   |      |   |   |         |   |   |   |
| Impaired loans with a valuation allowance                       |   |      | 2,696  |   |         | $      | 2,553 |   |
| Impaired loans without a valuation allowance                    |   |      | 1,399  |   |         |   | 1,723 |   |
| Total impaired loans                                            |   | $         | 4,095  |   |         | $      | 4,276 |   |
|                                                            |   |      |   |   |         |   |   |   |
| Valuation allowance related to impaired loans                   |   | $         | 758    |   |         | $      | 605 |   |
|                                                            |   |      |   |   |         |   |   |   |
| Valuation allowance as a percent of impaired loans              |   |      | 18.5   | %      |         |   | 14.2 | % |
| Impaired loans to loans net of unearned discount                |   |      | 1.0    | %      |         |   | 1.0 | % |
| Non-performing assets to period-end loans and foreclosed assets |   |      | 1.4    | %      |         |   | 1.3 | % |
| Total non-performing assets to total assets                     |   |      | 0.7    | %      |         |   | 0.7 | % |
| Allowance for loan losses to impaired loans                     |   |      | 143.1  | %      |         |   | 133.3 | % |
| Allowance for loan losses to total non-performing assets        |   |      | 105.1  | %      |         |   | 105.1 | % |

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----

|   | a) | Evaluation of Disclosure Controls and Procedures.  First Keystone Corporation maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) designed to ensure that information required to be disclosed in the reports that the Corporation files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.  Based upon their evaluation of those disclosure controls and procedures performed as of the end of the period covered by this report, the chief executive officer and chief financial officer of the Corporation concluded that the Corporation's disclosure controls and procedures were effective.  The Corporation believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a corporation have been detected. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Changes in internal control over financial reporting.  The Corporation made no changes in its internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting during the last fiscal quarter. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Item 1.  | Legal Proceedings |
|--------------------|-------------------|

| Item 1A. | There have been no material changes to the risk factors disclosed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
|--------------|----------------------------------------------------------------------------------|

|     Period       |   |   Total Number of Shares Purchased |    |   |   Average Price Paid per Share |   |    | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   |   | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |   |
|--------------------------------------|--------|----------------------------------------------|---------|--------|------------------------------------------|--------|---------|----------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------|--------|
| January 1 — January 31, 2011   |   |                                         | — |   |                                     |   | — |                                                                             |   |   | —                                                                        |   |   |   | 112,098 |   |
| February 1 — February 28, 2011 |   |                                         | — |   |                                     |   | — |                                                                             |   |   | —                                                                        |   |   |   | 112,098 |   |
| March 1 — March 31, 2011       |   |                                         | — |   |                                     |   | — |                                                                             |   |   | —                                                                        |   |   |   | 112,098 |   |
| Total                                |   |                                         | — |   |                                     |   | — |                                                                             |   |   | —                                                                        |   |   |   | 112,098 |   |

| Item 3.  | Defaults Upon Senior Securities |
|--------------------|---------------------------------|

| Item 4.  | Removed and Reserved |
|--------------------|----------------------|

| Item 5.  | Other Information |
|--------------------|-------------------|

----

| Item 6.  | Exhibits and Reports on Form 8-K |
|--------------------|----------------------------------|

| Exhibit Number |   | Description of Exhibit                                                                                                                                                                 |
|----------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                   |
| 3i             |   | Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3(i) to the Registrant's Report on Form 10-Q for the quarter ended March 31, 2006).                        |
|           |   |                                                                                                                                                                                   |
| 3ii            |   | By-Laws, as amended (Incorporated by reference to Exhibit 3(ii) to the Registrant's Report on Form 10-Q for the quarter ended March 31, 2006).                                         |
|           |   |                                                                                                                                                                                   |
| 10.1           |   | Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10 to the Registrant's Report on Form 10-Q for the quarter ended September 30, 2005).                      |
|           |   |                                                                                                                                                                                   |
| 10.2           |   | Management Incentive Compensation Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010).            |
|           |   |                                                                                                                                                                                   |
| 10.3           |   | Profit Sharing Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2006).                                  |
|           |   |                                                                                                                                                                                   |
| 10.4           |   | First Keystone Corporation 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2006). |
|           |   |                                                                                                                                                                                   |
| 14             |   | Code of Ethics (Incorporated by reference to Exhibit 14 to the Registrant’s Report on Form 8-K dated January 9, 2007).                                                           |
|           |   |                                                                                                                                                                                   |
| 31.1           |   | Rule 13a-15(e) and 15d-15(e) Certification of Chief Executive Officer.                                                                                                                 |
|           |   |                                                                                                                                                                                   |
| 31.2           |   | Rule 13a-15(e) and 15d-15(e) Certification of Chief Financial Officer.                                                                                                                 |
|           |   |                                                                                                                                                                                   |
| 32.1           |   | Section 1350 Certification of Chief Executive Officer.                                                                                                                                 |
|           |   |                                                                                                                                                                                   |
| 32.2           |   | Section 1350 Certification of Principal Financial Officer.                                                                                                                             |

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|         |   | FIRST KEYSTONE CORPORATION                        |
|--------------|--------|---------------------------------------------------|
|         |   | Registrant                                        |
|         |   |                                              |
| May 10, 2011 |   | /s/ Matthew P. Prosseda                           |
|         |   | Matthew P. Prosseda                               |
|         |   | Chief Executive Officer                           |
|         |   | (Principal Executive Officer)                     |
|         |   |                                              |
| May 10, 2011 |   | /s/ Diane C.A. Rosler                             |
|         |   | Diane C.A. Rosler                                 |
|         |   | Senior Vice President and Chief Financial Officer |
|         |   | (Principal Accounting Officer)                    |

----

| Exhibit |   | Description                                                                                                                                                                            |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                   |
| 3i      |   | Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3(i) to the Registrant's Report on Form 10-Q for the quarter ended March 31, 2006).                        |
|    |   |                                                                                                                                                                                   |
| 3ii     |   | By-Laws, as amended (Incorporated by reference to Exhibit 3(ii) to the Registrant's Report on Form 10-Q for the quarter ended March 31, 2006).                                         |
|    |   |                                                                                                                                                                                   |
| 10.1    |   | Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10 to the Registrant's Report on Form 10-Q for the quarter ended September 30, 2005).                      |
|    |   |                                                                                                                                                                                   |
| 10.2    |   | Management Incentive Compensation Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010).            |
|    |   |                                                                                                                                                                                   |
| 10.3    |   | Profit Sharing Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2006).                                  |
|    |   |                                                                                                                                                                                   |
| 10.4    |   | First Keystone Corporation 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2006). |
|    |   |                                                                                                                                                                                   |
| 31.1    |   | Rule 13a-15(e) and 15d-15(e) Certification of Chief Executive Officer.                                                                                                                 |
|    |   |                                                                                                                                                                                   |
| 31.2    |   | Rule 13a-15(e) and 15d-15(e) Certification of Chief Financial Officer.                                                                                                                 |
|    |   |                                                                                                                                                                                   |
| 32.1    |   | Section 1350 Certification of Chief Executive Officer.                                                                                                                                 |
|    |   |                                                                                                                                                                                   |
| 32.2    |   | Section 1350 Certification of Principal Financial Officer.                                                                                                                             |

----